NON-REPORTABLE
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE
JURISDICTION
CIVIL APPEAL NOS.49-50 OF 2016
(Arising Out of SLP (C) Nos.37534-37535 of 2013)
LAKHMI CHAND …………APPELLANT
Vs.
RELIANCE GENERAL INSURANCE …………RESPONDENT
J U D G M E N T
V. GOPALA GOWDA, J.
Leave granted.
The present appeals arise out of the impugned judgment and order dated
26.04.2013 in Revision Petition No. 2032 of 2012 and order dated 23.07.2013
in Review Petition No. 253 of 2013 passed by the National Consumer Disputes
Redressal Commission, New Delhi (hereinafter referred to as the “National
Commission”), whereby the petitions challenging the order dated 29.02.2012
passed by the Haryana State Consumer Disputes Redressal Commission were
dismissed.
The brief facts of the case which are required to appreciate the rival
legal contentions advanced by the learned counsel appearing on behalf of
the parties are stated in brief as hereunder:-
The appellant was the owner of a Tata Motors goods carrying vehicle bearing
registration No.HR-67-7492. The vehicle was insured with the respondent-
Company vide policy No. 15019923334104992 with effect from 31.07.2009,
valid upto 30.07.2010. The risk covered in this policy was to the tune of
Rs.2,21,153/-. The said vehicle met with an accident on 11.02.2010 on
account of rash and negligent driving of the offending vehicle bearing
registration no. UP-75-J 9860. In this regard, an FIR No.66 of 2010 dated
11.02.2010 was registered with the jurisdictional Police Station, Sadar,
Fatehabad, for the offence punishable under Sections 279, 337, 304A and 427
of the Indian Penal Code (hereinafter referred to as “the IPC”).
The appellant incurred expenses amounting to Rs.1,64,033/- for the repair
of his vehicle and also informed the respondent- Company about the accident
and damage caused to his vehicle. In this connection, the respondent-
Company appointed one Mr. Atam Prakash Chawla, as the Surveyor to assess
the damage caused to the said vehicle. After inspecting the vehicle, the
Surveyor assessed the damage caused to the vehicle at Rs.90,000/-, whereas
the appellant had preferred a claim for a sum of Rs.1,64,033/- with
supporting bills. In addition to above, the respondent-Company appointed
M/s Innovation Auto Risk Claim Manager for the purpose of investigation.
According to the report of the investigator, five passengers were
travelling in the goods-carrying vehicle, though the seating capacity of
the vehicle as per the registration certificate was only 1+1. On the basis
of findings of the said report, the respondent-Company vide letter dated
26.07.2010 rejected the claim of the appellant for the reason that the loss
did not fall within the scope and purview of the insurance policy.
Aggrieved of the letter of rejection of the claim of the appellant by the
respondent-Company, he filed Complaint No.517 of 2010 against the
respondent-Company dated 17.09.2010 before the District Consumer Disputes
Redressal Forum, Sonepat (hereinafter referred to as the “District Forum”)
under Section 12 of the Consumer Protection Act, 1986 for the claim of
Rs.1,64,033/- towards the repair of his vehicle on the ground that the
rejection of the claim amounts to deficiency in service on the part of the
respondent-Company.
The respondent-Company filed a detailed written statement before the
District Forum disputing the claim of the appellant. It took the plea that
the complainant had violated the terms and conditions of the policy, as
five passengers were travelling in the goods-carrying vehicle at the time
of accident, whereas the permitted seating capacity of the motor vehicle of
the appellant was only 1+1.
The District Forum on the basis of the pleadings of the parties and the
materials on record considered the judgment of the National Commission in
the case of National Insurance Co. Ltd. v. Pravinbhai D. Prajapati[1],
wherein it was held that if the number of persons travelling in the vehicle
at the time of the accident did not have a bearing on the cause of
accident, then the mere factum of the presence of more persons in the
vehicle would not disentitle the insured claimant from claiming
compensation under the policy towards the repair charges of the vehicle
paid by the appellant. The District Forum accordingly directed the
respondent-Company to settle the claim of the appellant on non-standard
basis upto 75% of the amount spent for effecting repairs to the damaged
vehicle after taking into consideration the claim amount of Rs.1,64,033/-.
The District Forum further directed the respondent-Company to settle the
amount to be paid to the appellant along with interest at the rate of 9%
per annum from the date of lodging of the claim by the appellant with the
respondent-Company. The respondent-Company was further directed to pay
Rs.2,000/- for rendering deficient service, causing mental agony and
harassment and towards litigation expenses incurred by the appellant.
Aggrieved of the order of the District Forum, the respondent Company
preferred an appeal before the State Commission urging various grounds. The
State Commission placed reliance upon the judgment of this Court in the
case of Suraj Mal Ram Niwas Oil Mills (P) Ltd. v. United India Insurance
Co. Ltd. & Anr.[2], wherein it was held as under:
“Before embarking on an examination of the correctness of the grounds of
repudiation of the policy, it would be apposite to examine the nature of a
contract of insurance. It is trite that in a contract of insurance, the
rights and obligations are governed by the terms of the said contract.
Therefore, the terms of a contract of insurance law have to be strictly
construed and no exception can be made on the ground of equity.
Thus, it needs little emphasis that in construing the terms of a contract
of insurance important, and it is not open for the court to add, delete or
substitute any words. It is also well settled that since upon issuance of
an insurance policy, the insurer undertakes to indemnify the loss suffered
by the insured on account of risk covered by the policy, its terms have to
be strictly construed to determine the extent of liability of the insurer.
Therefore, the endeavour of the court should always be to interpret the
words in which the contract is expressed by the parties.”
The State Commission applied the observation made in the above said case by
this Court to the case on hand and held that the District Forum has
committed a serious error in allowing the complaint filed by the appellant
herein against the respondent-Company. The State Commission accepted the
appeal filed by the respondent-Company and dismissed the complaint of the
appellant, vide its order dated 29.02.2012 by setting aside the judgment
and order of the District Forum.
The said judgment passed by the State Commission was challenged by the
appellant before the National Commission by way of filing Revision Petition
No.2032 of 2012 under Section 21(b) of the Consumer Protection Act, 1986
questioning the correctness of the same by urging various tenable grounds.
After examining the material evidence on record, the National Commission
has arrived at the conclusion and held that the factum of the vehicle in
question carrying six passengers at the time of the occurrence of the
accident was an undisputed fact. Thus, there had been a violation of the
terms and conditions of the insurance policy covered to the vehicle by the
appellant, as he had allowed six passengers to travel in the vehicle when
the permitted load was only 1+1. The National Commission upheld the order
passed by the State Commission and dismissed the Revision Petition filed by
the appellant by recording its reasons. The Review Petition filed against
the dismissal of the Revision Petition by the appellant was
also dismissed without considering the grounds urged for reviewing its
order.
The present appeals have been filed challenging the orders passed by the
National Commission in dismissing the Revision and Review petitions. In our
considered view, the concurrent findings recorded by the National
Commission in the impugned judgment and order are erroneous in law for the
following reasons.
It is an admitted fact that the accident of the vehicle of the appellant
was caused on account of rash and negligent driving of the offending
vehicle bearing registration no. UP-75-J9860. An FIR No. 66 of 2010 dated
11.02.2010 was registered under Sections 279, 337, 338, 304-A and 427 of
the Indian Penal Code against the driver of the said vehicle for the
offences referred to supra. The vehicle of the appellant was badly damaged
in the accident and it is an undisputed fact that the report of Surveyor
assessed the loss at Rs.90,000/-, but the actual amount incurred by the
appellant on the repair of his vehicle was Rs.1,64,033/-. The said claim
was arbitrarily rejected by the respondent-Company on the ground that the
damage caused to the vehicle did not fall within the scope and purview of
the insurance policy, as there was a contravention of terms and conditions
of the policy of the vehicle.
The National Commission upheld the order of dismissal of the complaint of
the appellant passed by the State Commission. The National Commission
however, did not consider the judgment of this Court in the case of B.V.
Nagaraju v. Oriental Insurance Co. Ltd Divisional Officer, Hassan[3]. In
that case, the insurance company had taken the defence that the vehicle in
question was carrying more passengers than the permitted capacity in terms
of the policy at the time of the accident. The said plea of the insurance
company was rejected. This Court held that the mere factum of carrying more
passengers than the permitted seating capacity in the goods carrying
vehicle by the insured does not amount to a fundamental breach of the
terms and conditions of the policy so as to allow the insurer to eschew its
liability towards the damage caused to the vehicle. This Court in the said
case has held as under:-
“It is plain from the terms of the Insurance Policy that the insured
vehicle was entitled to carry six workmen, excluding the driver. If those
six workmen when travelling in the vehicle, are assumed not to have
increased risk from the point of view of the Insurance Company on occurring
of an accident, how could those added persons be said to have contributed
to the causing of it is the pose, keeping apart the load it was carrying.
In the present case the driver of the vehicle was not responsible for the
accident. Merely by lifting a person or two, or even three, by the driver
or the cleaner of the vehicle, without the knowledge of the owner, cannot
be said to be such a fundamental breach that the owner should, in all
events, be denied indemnification. The misuse of the vehicle was somewhat
irregular though, but not so fundamental in nature so as to put an end to
the contract, unless some factors existed which by themselves, had gone to
contribute to the causing of the accident.”
(emphasis laid by this Court)
Further, in the case of National Insurance Company Ltd. v. Swaran Singh &
Ors[4]. a three judge bench of this Court has held as under:-
”49. Such a breach on the part of the insured must be established by the
insurer to show that not only the insured used or caused or permitted to be
used the vehicle in breach of the Act but also that the damage he suffered
flowed from the breach.
52. In Narvinva’s case (supra) a Division Bench of this Court observed:
“The insurance company complains of breach of a term of contract which
would permit it to disown its liability under the contract of insurance. If
a breach of a term of contract permits a party to the contract complaints
of breach to prove that the breach has been committed by the other party to
the contract. The test in such a situation would be who would fail if no
evidence is led.
69. The proposition of law is no longer res- integra that the person who
alleges breach must prove the same. The insurance company is, thus,
required to establish the said breach by cogent evident. In the event the
insurance company fails to prove that there has been breach of conditions
of policy on the part of the insured, the insurance company cannot be
absolved of its liability.”
(emphasis laid by this Court)
The judgment in the case of Swaran Singh (supra) has been followed
subsequently in the case of Oriental Insurance Company Ltd. v. Meena
Variyal[5], wherein this Court held as under:-
“We shall now examine the decision in Swaran Singh on which practically the
whole of the arguments on behalf of the claimants were rested. On examining
the facts, it is found that, that was a case which related to a claim by a
third party. In claims by a third party, there cannot be much doubt that
once the liability of the owner is found, the insurance company is liable
to indemnify the owner, subject of course, to any defence that may be
available to it under Section 149(2) of the Act. In case where the
liability is satisfied by the insurance company in the first instance, it
may have recourse to the owner in respect of a claim available in that
behalf, it may have recourse to the owner in respect of a claim available
that behalf. Swaran Singh was a case where the insurance company raised a
defence that the owner had permitted the vehicle to be driven by a driver
who really had no licence and the driving licence produced by him was a
fake one. There Lordships discussed the position and held ultimately that a
defence under Section 149(2)(a)(ii) of the Act was available to an insurer
when a claim is filed either under Section 163-A or under Section 166 of
the Act. The breach of a policy condition has to be proved to have been
committed by the insured for avoiding liability by the insurer. Mere
absence of or production of fake or invalid driving licence or
disqualification of the driver for driving at the relevant time, are not in
themselves defences available to the insurer against either the insured or
the third party. The insurance company to avoid liability, must not only
establish the available defence raised in the proceeding concerned but must
also establish breach on the part of the owner of the vehicle for which the
burden of proof would rest with the insurance company. Whether such a
burden had been discharged, would depend upon the facts breach on the part
of the insured concerning a policy condition, the insurer would not be
allowed to avoid its liability towards the insured unless the said breach
of condition is so fundamental as to be found to have contributed to the
cause of the accident.”
(emphasis laid by this Court)
It becomes very clear from a perusal of the above mentioned case law of
this Court that the insurance company, in order to avoid liability must not
only establish the defence claimed in the proceeding concerned, but also
establish breach on the part of the owner/insured of the vehicle for which
the burden of proof would rest with the insurance company. In the instant
case, the respondent-Company has not produced any evidence on record to
prove that the accident occurred on account of the overloading of
passengers in the goods carrying vehicle. Further, as has been held in the
case of B.V. Nagaraju (supra) that for the insurer to avoid his liability,
the breach of the policy must be so fundamental in nature that it brings
the contract to an end. In the instant case, it is undisputed that the
accident was infact caused on account of the rash and negligent driving of
the offending vehicle by its driver, against whom a criminal case vide FIR
no. 66 of 2010 was registered for the offences referred to supra under the
provisions of the IPC. These facts have not been taken into consideration
by either the State Commission or National Commission while exercising
their jurisdiction and setting aside the order of the District Forum.
Therefore, the judgment and order of the National Commission dated
26.04.2013 passed in the Revision Petition No. 2032 of 2012 is liable to be
set aside, as the said findings recorded in the judgment are erroneous in
law.
Accordingly, we allow these appeals and restore the judgment and order of
District Forum. Further, we award a sum of Rs.25,000/- towards the cost of
the litigation as the respondent-Company has unnecessarily litigated the
matter up to this Court despite the clear pronouncement of law laid down by
this Court on the question with regard to the violation of terms and
conditions of the policy and burden of proof is on the insurer to prove the
fact of such alleged breach of terms and conditions by the insured.
Since we have restored the judgment and order of District Forum, we direct
the respondent-Company to pay the amount awarded by the District Forum with
interest and the cost which we have awarded in these proceedings within six
weeks from the date of the receipt of the copy of this judgment.
…………………………………………CJI. [T.S. THAKUR]
………………………………………………J.
[V. GOPALA GOWDA]
New Delhi,
January 7, 2016
ITEM NO.1B-For Judgment COURT NO.10 SECTION XVII
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s).49-50/2016 arising from SLP(C) Nos. 37534-37535/2013
LAKHMI CHAND Appellant(s)
VERSUS
RELIANCE GENERAL INSURANCE Respondent(s)
Date : 07/01/2016 These appeals were called for pronouncement of JUDGMENT
today.
For Appellant(s)
Mr. Munawwar Naseem,Adv.
For Respondent(s)
Mr. Garvesh Kabra,Adv.
Hon'ble Mr. Justice V.Gopala Gowda pronounced the judgment of the
Bench comprising Hon'ble the Chief Justice and His Lordship.
Leave granted.
The appeals are allowed in terms of the signed Non-Reportable
Judgment.
(VINOD KUMAR) (MALA KUMARI SHARMA)
COURT MASTER COURT MASTER
(Signed Non-Reportable judgment is placed on the file)
-----------------------
[1] [2] IV 2010 CPJ 315 (NC)
[3] [4] (2010) 10 SCC 567
[5] [6] (1996) 4 SCC 647
[7] [8] (2004) 3 SCC 297
[9] [10] (2007) 5 SCC 428
